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By JAMES WILLIAMSON

As Qantas CEO Geoff Dixon (pictured) prepares to step down and hand the reigns over to his replacement, Jetstar’s Alan Joyce, he leaves a damaged brand. Qantas, the self proclaimed Spirit of Australia, is battling to stay on top of its reputation for safety amongst an environment of cost-cutting in the airline industry. The company’s 100% safety record and Australian heritage have copped a significant battering over the last 10 months with in-flight glitches and continued out-sourcing of maintenance to cheaper, overseas markets.

The airline industry faces some serious threats. Rising fuel prices have had a significant impact on airline profitability. According to Virgin Blue Airline Chief executive Brett Godfrey, fuel has gone from representing about 15% of costs to a massive 35%. Fuel prices, coupled with a global economic gloom from the US-led credit crunch, paints a challenging picture for the airline industry. The forecast from the International Air Transport Association (IATA) says international airlines will lose up to $11.95 Billion globally by the end of the year. The industry faces increased cost and a falling demand due to the economic downturn. Global year-on-year passenger demand growth in July fell to 1.9%, its lowest level in 5 years. Growth of passenger demand is expected to grow at 3.2% compared to previous expectations of between 4 and 5%.

In this challenging environment Qantas is also battling serious public scrutiny regarding its safety and maintenance schedules. Over the last 10 months there has been a series of mechanical problems on board Qantas flights. The airline has had to deal with an on-board explosion of an oxygen bottle over the South China Sea, leaving a gaping hole in the fuselage, and various incidents involving detachment of panels and landing gear problems. Perhaps the closest it has come yet to dinting its 100% safety record, on October 2nd an Airbus A330-300 plunged 650 feet in seconds over Perth injuring 40 passengers before the pilots regained control. These issues have coincided with a range of staff cuts and outsourcing of maintenance, placing accountability with the Qantas bean counters in the public eye.

More questions have been raised over the Qantas maintenance scheduled following a leak in mid-September that the company pressured an engineer to alter a report initially stating that a crack in a Boeing 747-400 had been painted over to cover it up. In the same month Civil Aviation Safety Authority (CASA) charged the airline with failing to meet its own maintenance requirements. CASA acknowledged that the spate of problems with the Qantas aircraft were not necessarily linked, but outlined broad deficiencies in the Qantas maintenance program.   

The effect of the flurry of negative press has thrust the company’s safety record under the spotlight, bringing immeasurable damage to the company’s reputation. Dave Oliver from the Australian Manufacturers Workers Union (AMWU) believes the company must shift maintenance back onshore to regain public confidence. The AMWU has held a series of meetings to encourage Qantas to re-assess its maintenance procedures. Qantas has recently split its company into Qantas Engineering and Maintenance and Qantas Airways, the unions argue that this had blurred the lines of responsibility. They argue that the company must unite to promote accountability and guarantee conditions for the work force.

Qantas argues that the recent quality concerns have had nothing to do with the split in the company or the out-sourcing of maintenance to Malaysia. They maintain that an ongoing union dispute – Qantas in favour of a 3% pay increase rather than 5% – has caused the lapses. Qantas also argue that those who are against outsourcing are union groups who want to guarantee jobs on-shore. They also maintain that the incidents are un-related and aren’t representative of ongoing cost cuts.

There is no doubt that mechanical failures are an inevitable part of owning an airline. It’s no secret that airlines are increasingly searching for new ways to keep fairs low and remain profitable. Many of the issues in the last 10 months could be put down to bad luck but Qantas must be seen as being pro-active in the current attack on their brand reputation, putting things down to ‘bad luck’ will not alleviate negative publicity.

Qantas maintains that it must shift jobs overseas in order to remain internationally competitive and establish itself as a global mega-carrier. Geoff Dixon’s push for a leaner, more efficient airline has been aggressive – some would it’s the only way considering the current competitive environment. With Alan Joyce about to take over, hopefully he can establish the fine line of maintaining a lean but healthy operation.